Return on investment cannot be used effectively to evaluate profit centres because it motivates managers to make suboptimal decisions from the viewpoint of the organisations' owners.

Question

Quizplus · Accepted Answer

Return on investment (ROI) can lead managers to focus on short-term gains or avoid necessary investments that might lower ROI but benefit the organization in the long run, thus potentially misaligning with the owners' broader objectives.

Return on Investment Cannot Be Used Effectively to Evaluate Profit